Keith Weiner: Will Interest Rate Hikes Fix Inflation?
Tom welcomes back, Keith Weiner, to the show. Keith is the President & Founder of Gold Standard Institute USA and CEO of Monetary Metals.
Keith discusses the recent “Uganda gold discovery” and all the anti-gold people believe it’s going to collapse the price. Even if it’s true, no one is going to mine anything below the cost of production. All the gold ever mined in history is still exists, and all of it gets recycled. Gold produced doesn’t really go away.
Keith explains how backwardation works in commodities. It means if you have crude oil in storage, you could sell it today for delivery in the future. It’s a sign that we have scarcity in the market.
Gold serves as an excellent benchmark for measuring your wealth in ounces instead of dollars. It’s difficult measuring wealth in currencies that consistently shrink.
Keith argues the dollar doesn’t determine its value strictly from the quantity that exists. If that was the case, the dollar wouldn’t be worth much today.
Gold has strength as money because it’s not volatile, and real money should be boring. If it’s exciting, the price fluctuates enormously, but that makes it the opposite of money. We see that with antique cars, paintings, real estate, and crypto. Volatility is due to the demand and the ratio of buyers to sellers. The smaller the market/float the more volatile it will tend to be and Bitcoin is not an exception.
Silver has an industrial component, but it’s also useful because it’s a monetary metal. It’s strongly correlated with gold. Gold is more useful for carrying value over distances, while the average wage earner has often been paid in silver.
Money is not based in free markets. All monetary systems are regulated and fixed by governments.
Falling interest rates creates many ill effects. Hiking rates won’t increase the supply of goods, but will cause higher prices.
Economists often gets things backwards when it comes to real monetary theory. The central planners prefer that consumers don’t understand the basics of monetary systems. The socialists are basically consuming the cream off the top of the economy.
The purpose of a theory is to explain reality. So make sure your theories equate to reality and if they don’t, you need a better one. If your explanation contradicts reality, your explanation has to go because reality isn’t leaving.
Time Stamp References:
0:00 – Introduction
0:52 – In Gold We Trust
4:25 – Backwardation
7:53 – Marginal Utility
12:45 – Bitcoins Utility
16:09 – Volatility
21:18 – Silver Vs. Gold
26:46 – ‘Fixing’ Things
30:29 – Inflation Control
33:53 – Backasswards
38:27 – Better Theories
43:16 – Wrap Up
Talking Points From This Episode
- Why the supply of gold is unlikely to have much effect on price.
- Golds usefulness as a benchmark to determine wealth.
- Modern economists have most everything backwards.
- The importance of having theories that directly correlate with reality.
Keith Weiner earned his Ph.D. from the (non-accredited) New Austrian School of Economics. He speaks worldwide about the failing dollar system and the need to rediscover the gold standard. To this end, He founded the Gold Standard Institute USA and Monetary Metals.
The former is a nonprofit focused on education and outreach. The latter makes it profitable to invest in the gold standard by paying gold interest on gold. Previously, Keith founded DiamondWare, a voice technology company that he sold to Nortel Networks in 2008.